Joburg's failure to collect budgeted revenue may compromise service delivery

A huge revenue collection gap in the City of Joburg was thrust into the spotlight this week during the release of a South African Cities Network report into municipal finances.

The report reviewed nine of the biggest municipalities.It revealed that in the 2016/17 financial year, the City of Joburg spent only R1.9billion of its property, plant and equipment (PPE) budget on repairs and maintenance, falling short of the budgeted R4.8bn.

The shortfall was caused by the council’s failure to collect budgeted revenue, stated the report.It warned that the sustainability of service delivery and infrastructure would be compromised if underspending on the PPE budget persisted.

The National Treasury has set a national norm that municipalities should budget to spend at least 8% of the value of PPE on maintenance.The PPE budget includes long-term assets such as vehicles, machinery and buildings.

“The level of spending on repairs and maintenance is a good indicator of a city’s efforts to protect its infrastructure base and ensure the sustainability of services,” says the report.

“It results in deteriorating reliability and quality of services, higher future costs of maintenance and refurbishment, shorter useful lifespan of assets, necessitating earlier replacement, and reduced revenues due to the failure to sell water, electricity and other services.”

The report warned how increasing provisions for debt impairment was not a positive development, because it indicated cities were anticipating a deterioration in their ability to collect billed revenue.

Tshwane and Ekurhuleni failed to provide information on spending on repairs and maintenance in their 2017/18 budget documentation. “This is a serious breach of their financial management and governance obligations, as municipalities are required to reflect their spendings for repairs and maintenance,” found the South African Cities Network report.

Between 2013/14 and 2016/17 operating expenditures by cities grew by an annual average rate of 8.1%, it stated.Over the 2017/18 Medium-Term Expenditure Framework (MTEF) growth in expenditure was set to slow down to an annual average rate of 7.7%.Over the MTEF period six of the nine cities had not budgeted to spend more than 5% of PPE on repairs and maintenance, said the report.

“This showed lack of appreciation in these cities of the importance of repairs and maintenance spending.”In 2016/17, the nine cities, including Nelson Mandela Bay Municipality, Tshwane and Mangaung, spent between 93% and 113% of their original budgeted expenditure.

Speaking in council this week, Musa Novela, the EFF’s Gauteng chairperson, accused the DA of continuing the legacy of poor governance created by the ANC.

“When you came into office you spoke about change. We are waiting for this to happen. We cannot have a continuation of poor performance.”Novela also criticised Joburg for having too many acting personnel in senior positions, making it impossible to ensure accountability.